🌋El Salvador's Volcanic Crypto Gains,💸Cash Trumps CBDC in China,⛓Africa's First Blockchain-Powered Government

May 18, 2024

Your 5 minute emerging markets web3 weekly update

In This Issue

Latin America and the Caribbean
🔸El Salvador Mines $29M in Bitcoin Using Volcano Power, Boosts Holdings to $354M
🔸Blockchain vs. Pix: Central Bank of Brazil's Coordinator Explains the Best Option for Small Remittances

Asia
🔸China CBDC Faces Adoption Challenges as Consumers Prefer Cash, Alipay, and WeChat
🔸Bitcoin Asia in Hong Kong Sees Strong Turnout from Mainland China Amid Crypto Ban

Africa
🔸Ghana to Become Africa's First Blockchain-Powered Government
🔸IMF Recommends Stronger Oversight for Nigeria's Booming Crypto Market

Eastern Europe
🔸Turkey Set to Regulate Crypto Trading Platforms to Exit FATF Gray List
🔸St. Petersburg Stock Exchange Poised to Join Russia's International Crypto Payment Project

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Latin America and the Caribbean

Image Credit: Dall-E 3

El Salvador has mined 474 bitcoins worth $29 million using geothermal energy from the Tecapa volcano, bringing the government's total bitcoin holdings to 5,750, valued at nearly $354 million. The country's Bitcoin Office, which has installed 300 processors for bitcoin mining, reports that 1.5 MW of energy from the state-owned power plant is dedicated to cryptocurrency mining. Despite criticism and scrutiny over the environmental impact, El Salvador continues to use green energy for bitcoin mining, aiming to capitalize on its legal tender status adopted in 2021.

Rafael Bianchini, a coordinator at the Central Bank of Brazil and professor at Fundação Getúlio Vargas, expressed skepticism about blockchain replacing Swift for international transfers, advocating for an international Pix system for small remittances due to its simplicity and cost-effectiveness. Pix is a payment method developed by the Central Bank of Brazil that enables transactions to occur in less than 10 seconds, 24 hours a day, 7 days a week, 365 days a year. He noted that Pix's ISO 20.022 messaging standard ensures interoperability and low-cost transactions, but highlighted budget constraints and integration difficulties with central banks as challenges. Bianchini suggests that while Swift is currently efficient but expensive, blockchain technology would be better suited for wholesale interbank transfers, while Pix remains ideal for retail use.

Asia

Image Credit: Dall-E 3

China is piloting the use of its digital yuan (e-CNY) CBDC to pay state employees, with many workers converting it to cash due to limited acceptance and lack of interest accrual. As China continues to expand the use of e-CNY, over 15 million new wallets were opened last year, with the currency being accepted by more than 2.7 million shops, and used for public services such as tax and social security payments. However, privacy concerns and the dominance of Alipay and WeChat Pay hinder wider adoption, despite assurances from authorities about "controllable anonymity" for smaller transactions and traceability for larger ones. The digital yuan aims to enhance transparency and combat corruption, but faces challenges in replacing well-established payment systems.

The Bitcoin Asia conference in Hong Kong attracted around 5,500 attendees, with significant participation from mainland China, highlighting the region's growing interest in blockchain and cryptocurrency due to Hong Kong’s new bitcoin and ether ETFs and the development of layer 2 projects. The event highlighted Hong Kong's supportive policies for the cryptocurrency industry, potentially positioning the city as a conduit for Chinese investors despite the mainland's crypto trading ban. Conference organizers are optimistic about Hong Kong's future role in the crypto ecosystem and are considering the city for future events alongside Tokyo and Singapore.

Africa

Image Credit: Dall-E 3

Ghana's Vice President, Mahamudu Bawumia, announced plans to integrate blockchain technology into government operations, aiming to make Ghana the first blockchain-powered government in Africa. This initiative aims to enhance transparency and combat corruption, potentially recovering billions lost to poor governance and lack of accountability. Speaking at the 14th Regional Conference of Heads of Anti-Corruption Agencies in Commonwealth Africa, Bawumia highlighted the importance of anti-corruption agencies investing in digital forensics and blockchain to effectively track and disrupt corruption networks across Africa. He also emphasized the importance of digitalization initiatives like the Ghana Card, which has already saved millions by eliminating fraudulent pension and payroll entries.

The International Monetary Fund (IMF) has recommended that global crypto trading platforms in Nigeria be registered or licensed and subject to the same regulatory requirements as financial intermediaries to ensure financial stability. The IMF also urged Nigerian authorities to strengthen anti-money laundering and combating the financing of terrorism controls on these platforms, emphasizing risk-based supervision. Nigerian officials acknowledged the pressure on the exchange rate from illicit cryptocurrency flows and highlighted recent reforms aimed at attracting foreign exchange liquidity to stabilize the market.

Eastern Europe

Image Credit: Dall-E 3

Turkey is finalizing a new cryptocurrency regulation to mitigate transaction risks and align with international standards. Chaired by AK Party’s Abdullah Güler, the draft law will be submitted to Parliament and aims to license and supervise trading platforms under the Capital Markets Board (SPK), improving platform operations and compliance. This regulation is expected to help Turkey exit the Financial Action Task Force's (FATF) "gray list."

The St. Petersburg Stock Exchange is ready to join the Bank of Russia's cryptocurrency project for international settlements pending legislative approval, according to general director Evgeny Serdyukov. The Bank of Russia may begin creating an experimental platform for using cryptocurrencies in international payments starting September 1, coordinating with Rosfinmonitoring, the Ministry of Finance, and the FSB. The Exchange supports digital financial assets (DFAs) trading and is seeking legislative changes to trade DFAs like traditional securities to enhance access for private investors.

Thanks for reading and have a great week ahead!

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Written by Jon Lira. Connect with him on LinkedIn.

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